Top 5 RULES To Become A Successful Digital Entrepreneur in 2023
Top 5 RULES To Become A Successful Digital Entrepreneur in 2023
w/ Peter Thiel, Mohnish Pabrai, Nassim Taleb, Guy Kawasaki, Naval Ravikant
Hey friend!
I have collected some insightful nuggets on the topic of Entrepreneurship, and more specifically on the domain of Internet Entrepreneurship. So these nuggets are relevant for both (1) building software (using CODE leverage) and (2) creating content (using MEDIA leverage) — These are the 2 new types of Leverage (from the old ones: Capital and Labor) where all the “new fortunes” are being created, according to Naval Ravikant.
Hope you find it valuable :)
🧠 Top Quotes
“What a customer tells you… is just pure gold”
- Mohnish Pabrai
“Any business where you are judged by your peers and not by some contact with reality is gonna rot, eventually.”
- Nassim Taleb
"It’s better to think of distribution as something essential to the design of your product"
- Peter Thiel
"You can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something... This approach has never let me down, and it has made all the difference in my life."
- Steve Jobs
👨 People
Peter Thiel is the co-founder of Paypal and first outside investor in Facebook. In 2022, his estimated net worth was 7 Billion $.
Mohnish Pabrai is an entrepreneur and investor. He sold his first business for 20M$. He founded the NGO "Dakshana" in India, and has a close friendship with Charlie Munger.
Nassim Taleb's work concerns problems of randomness, probability, and uncertainty. Author of many successful books, including The Black Swan, which The Sunday Times considers one of the 12 most influential books since World War II.
Guy Kawasaki is the former chief evangelist of Apple and co-founder of Garage Technology Ventures.
Naval Ravikant is the co-founder of AngelList and co-author of Venture Hacks. He has invested (early-stage) in companies like Uber, Twitter and FourSquare.
📝 Notes
Rule #1 — Start with a Small Market. Then, gradually Expand. [Peter Thiel]
Peter Thiel argues that the mistake that many entrepreneurs make is to go after a Big Market (the typical multi-billion dollar market where people say “if we can just take 1% of this market, we can create a billion-dollar business…”). It’s a mistake because:
If you are creating something for a Big Market, it means that you are making something that is too generic. Thus, you are making something that is far from being unique / differentiated. And as Thiel explains, there are 2 necessary things to build a *profitable* business — Make something UNIQUE and VALUABLE for a group of people. The *valuable* part makes the business, and the *unique* part makes the profits. If you build something too generic, you might be making something valuable for a group of people, but it is not unique and thus the business is likely to fail (because you will compete on prices with other businesses that offer the same product/service).
A Big Market also means fierce competition. Because the most intuitive (though incorrect) thing for most entrepreneurs out there is to go and take a percentage of a billion-dollar market. And this is also what Business Schools would tell people to do! No Business School teacher will tell you “go for a super small market where potentially won’t be any value”. But as we will see later, this is exactly what one should do! Because the best way to (eventually) conquer a valuable market is to go for an almost insignificant market, dominate it and then repeat it with similar markets.
Now, let’s see some examples of Internet-based companies that have started with small markets and then expanded to similar and bigger markets…
Amazon
It started as an online book store. Then, once they conquered most of that market, they started to offer any product on their website — so it went from an online book store to become a generic E-commerce Platform. After that, they started with other markets: The Grocery’s Stores Market (with Amazon Fresh), Music Streaming (with Amazon Music), Electronic Reading (with Kindle) and even Cloud Services (with AWS).
Ebay
It Started with offering only Pez Dispensers. Then it went for the Beanie Babies auctioning Market. And today Ebay is the biggest platform for auctioning any product.
Paypal
Started with Ebay’s “Power Sellers” (a group of around 20,000 people that made many transactions per day on Ebay). Peter Thiel argues that this was actually a horrible market — it was a group of people selling junk on the internet. But Paypal could deliver a product that was ideal for them (imagine the pain of having to make multiple bank transactions per day for each trade! Of course they would take the chance with Paypal to avoid that). Paypal gained 25-30% of that market in 2-3 months. And this built brand recognition and a starting base for Paypal’s operations. They kept expanding markets and today Paypal is a well-recognized brand in the Payments Market for consumers and merchants.
Facebook
Started as a Social Network only for Harvard students — A market of 10,000 people. Facebook gained 60% of that market in just 10 days! And today, we all know how far Facebook (or Meta) got.
As it can be observed, many of these big dominant companies started with small and low-value markets. The Business School verdict for a starting Facebook or Paypal would have been that their markets are so small that these companies can’t have any value! And that’s indeed true, but only if they would have stayed in those markets forever. So most entrepreneurs and Business School scholars are missing “the forest for the trees” — they can’t see past the initial small market, and so in their minds they see a business that forever will stay with Ebay’s Power Sellers or Facebook’s Harvard Markets.
But the truth is that the best way to differentiate is to start with a super small market, and the best way to eventually build a sustainable business is to grow concentrically from small markets to similar and slightly bigger markets!
You can differentiate in Small Markets not only because the market is more specific, but also because most people won’t see the value of going there (less competition)!
Let’s end this chapter with a passage from Peter Thiel’s book Zero to One…
Tolstoy opens Anna Karenina by observing: “All happy families are alike; each unhappy family is unhappy in its own way.” Business is the opposite. All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.
I asked Chat-GPT to re-write this with the tone of Mark Zuckerberg and having into consideration the context of Mark’s history. This was the reply 👇“Hey there, it's Mark. When I started Facebook back in my Harvard dorm room, I wasn't thinking about conquering a billion-dollar market. I was just trying to connect with my fellow students and make campus life more social. But as we grew and expanded, I realized that starting with a small market was actually the key to our success.
I've always believed that the best way to build a profitable business is to create something unique and valuable for a specific group of people. That's why we started with a market of just 10,000 Harvard students, and then gradually expanded to other schools and eventually the world. And the rest, as they say, is history.”
Picking Nuggets Reflection:
Peter Thiel argues that to build a profitable business you have to deliver something unique and valuable to a group of people. Now let's adapt this idea to a Passage from the Book "The Almanack of Naval Ravikant", which I think adds some insightful nuances to this idea:
"You can go on the internet, and you can find your audience.
And you can build a business, and create a product, and build
wealth, and make people happy just uniquely expressing yourself
through the internet.
The internet enables any niche interest, as long as you’re the
best person at it to scale out. And the great news is because
every human is different, everyone is the best at something—
being themselves."
So you can deliver something unique just by being yourself. And then if a sufficiently sized group of people on the internet resonates with your content or find your products useful -- you can build a profitable business, and even better, a profitable business that is aligned with your ideas and character. And as you keep exploring your curiosity, that group of people will naturally expand to a bigger group.
Rule #2 — Customer Feedback beats your Intuition [Mohnish Pabrai]
Mohnish argues that whatever idea you come up with… is not going to work. Unless you build it taking into account what your prospects (people who might be interested in your products / content) — So you have to iterate (or sometimes build again) your product based on what people actually want, rather than your guesses about what they want. Because wealth is simply a byproduct of doing *what people want*.
“What a customer tells you… is just pure gold”
“Get a version 1.0 out there as soon as you can. Until you have some users to measure, you’re optimizing based on guesses. The ball you need to keep your eye on here is the underlying principle that wealth is what people want – If you plan to get rich… you have to know what people want.”
- Paul Graham (Book: Hackers and Painters)
Mohnish gave an example:
Viresh Bhatia, a good friend of Mohnish and a maverick computer geek, had a passion to build many software tools. One day he went to a Trade Show with 7 different products (and one idea of a product that he hadn’t yet built). After the 2 days that the Trade Show lasted, only one person grew an interest into one of this things — the fictional product that was yet only in idea-phase. So Viresh built this product to only this one customer, but then he went all-in into this product and he gained more customers! That product was Install-Shield, which is the default tool to install any program on Windows OS.
Bottom Line…
Drop your ego. Listen carefully to prospect’s feedback!
I fed Chat-GPT with my raw notes on this chapter, and told it to make it with the tone of J. K. Rowling. I was pretty amazed by it's reply and I enjoyed the reading, so I attach it down here 👇J. K. Rowling writing from my notes…
“Once upon a time, there was an idea that nobody believed in. It was met with skepticism and doubt, and many said that it would never work. But the creator knew deep down that his idea had potential.
And so, the creator set out to listen to their prospects and customers. He paid attention to their feedback and iterated the idea based on what they wanted. Like a skilled potion maker, he carefully crafted his idea, adding and subtracting ingredients until it was just right.
As if by magic, the creator's idea began to take shape. It was like a spell being cast, one that nobody could resist. And as the creator continued to listen to their customers and improve upon their idea, it grew stronger and more powerful.
Eventually, the creator's idea became a reality, one that nobody could deny. It was a triumph of perseverance and determination, a testament to the power of listening and iteration.
And like a character in a storybook, the creator and his idea lived happily ever after, enchanting and delighting all who came across it. For in the world of business, as in the world of magic, anything is possible if you have the courage to pursue your dreams and the wisdom to listen to those around you.”
Picking Nuggets Reflection:
One cool thing about being a Content Creator is that once you get some traction (reach an audience of +1K Subscribers), you immediately get the feedback from the viewers and subscribers. So you can optimize your content and products much more based on what people actually want rather than your intuition about what they want. As Paul Graham wrote on his book "Hackers and Painters", you want to keep the time-to-market as short as possible in order to eventually come up with something that people will actually want!Rule #3 — Customer Feedback beats Peer Feedback [Nassim Taleb]
“Any business where you are judged by your peers and not by some contact with reality is gonna rot, eventually.”
- Nassim Taleb
Nassim argues that the more you focus on the advice and feedback from peers and the less you focus on customer’s feedback, the higher your chance of failure! This happens for a phenomenon that Nassim calls “The Expert Problem” — in which pseudo-experts (experts with no skin in the game) advice to the business owner what to do and what he is best at. The problem is that because this “expertise” lacks substance, his advice is almost certainly bad — you can’t develop a unique product-market fit by listening to “industry experts”.
Rule #4 — Do Things in Parallel [Guy Kawasaki]
Kawasaki remarked that one important mistake that most entrepreneurs make is that they do things serially — they do one thing at a time.
First they put all their energy into getting the financing, then to build the team, then to create the product, then to distribute (marketing & sales) the product and finally collect the revenue.
But… “The serial world in Entrepreneurship does not exist". In the real world, you have to do all at once! So you do it in a parallel way, instead of a serial way.
Picking Nuggets Reflection:
Another interesting thing about being a Content Creator, is that the Product and the Distribution are essentially the same thing. So if you are a Content Creator, by default you build the business in a parallel way, you build the Product and the Distribution at the same time. And this is something that Peter Thiel also recommends on his book Zero to One:
"It’s better to think of distribution as something essential to the design of your product"
- Peter Thiel
Alex Hormozi also said in a conversation with the famous YouTuber Unspeakable...
"It is one of the unique things about the Media Business -- How you market the product is also how you fulfill it"
- Alex Hormozi
Besides, there is no need for external financing given the super tiny upfront investments and costs involved in the Content Creation business model. And in most cases, is not even necessary to have a team of people.Rule #5 — Be a Tinkerer [Naval Ravikant, Sahil Lavingia, Ben Thompson]
"I think most successful creators are ultimately tinkerers"
- Naval Ravikant
Tinkering is powerful because it means that you are opportunistic and you are open to different ways of doing things. This does not mean that you don’t have goals — you need to have goals, but the path to reach your goals is flexible! And the goals themselves can also be flexible! (in case you realize that you were executing in the wrong direction).
"Your only moment of Power and Knowledge is the Present. You just act from the Present."
- Naval Ravikant
Picking Nuggets Note:
Richard Wiseman, a renowned researcher on "Luck", has observed that one common trait among lucky people (individuals who consider themselves to be Lucky) is that they are highly flexible and opportunistic on the process to reach their ultimate goals.But most people are completely in-flexible / fixed-minded with their goals and execution paths — this is bad not only because you miss reality and the opportunities that exist in your present moment, but also because even if you “succeed” and reached the goal — it might have been the wrong goal all along! So you end up in a bad place.
Ben Thompson argues that this happens a lot when it comes to People’s Careers — they are so fixated in their 5-10 year plan, and many times when they get there they realize it wasn’t worth the pursuit and they also find a lot of competition (which is not a surprise — because when someone is fixed-minded with a long-term plan that’s usually the result of an extreme obedience to the subtle but highly dogmatic culture of the Society that surrounds him).
Naval Ravikant defines tinkerers as individuals who are “playing at the edges of their fields”. And they are playing because they are driven by a genuine curiosity, rather than any other incentive that is not for the sake of the activity itself.
Doing things for the sake of doing them it's one thing that I'm definitely trying to follow. Because that's the state of retirement -- when you are no longer sacrificing today for some imaginary tomorrow.
"When today is complete in and of itself you are retired"
- Naval Ravikant
"Reminder to make “doing the thing” the goal, not “what you get” from doing the thing."
- Alex Hormozi
Related to this, I'm lately trying to think deeply on the implications of the famous quote from Sigmund Freud:
"Love and work are the cornerstones of our humanness."
So I'm trying to maximize my time in 2 fronts:
* Do work that is meaningful to me and that it can be financially sustainable.
* Cultivate loving and meaningful relationships with the people around me, and new people that I admire and connect with. Naval argues that most of what Tinkerers do is “wasted ” (meaning that it does not end up becoming a financially sustainable activity), but that once in a while they will come up with something that is sustainable and can add value to Society in some way.
“What fools call 'wasting time' is most often the best investment.”
- Nassim Taleb
"You can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something... This approach has never let me down, and it has made all the difference in my life."
- Steve Jobs
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📚 Passage I loved
In this Passage from his Collection of books "Incerto", Nassim Taleb exposes the problem with the Narrative Fallacy...When I was about seven, my school teacher showed us a painting of an assembly of impecunious Frenchmen in the Middle Ages at a banquet held by one of their benefactors, some benevolent king, as I recall. They were holding the soup bowls to their lips. The school teacher asked me why they had their noses in the bowls and I answered, “Because they were not taught manners.” She replied, “Wrong. The reason is that they are hungry.” I felt stupid at not having thought of this, but I could not understand what made one explanation more likely than the other, or why we weren’t both wrong (there was no, or little, silverware at the time, which seems the most likely explanation).
Beyond our perceptional distortions, there is a problem with logic itself. How can someone have no clue yet be able to hold a set of perfectly sound and coherent viewpoints that match the observations and abide by every single possible rule of logic? Consider that two people can hold incompatible beliefs based on the exact same data. Does this mean that there are possible families of explanations and that each of these can be equally perfect and sound? Certainly not. One may have a million ways to explain things, but the true explanation is unique, whether or not it is within our reach.
In a famous argument, the logician W. V. Quine showed that there exist families of logically consistent interpretations and theories that can match a given series of facts. Such insight should warn us that mere absence of nonsense may not be sufficient to make something true.
This does not mean that we cannot talk about causes; there are ways to escape the narrative fallacy. How? By making conjectures and running experiments, or as we will see in Part Two (alas), by making testable predictions.* The psychology experiments I am discussing here do so: they select a population and run a test. The results should hold in Tennessee, in China, even in France.
Picking Nuggets Note:
Tim Ferriss just released a podcast with Naval Ravikant and David Deutsch. It was a mentally challenging podcast for me, and I definitely will listen to it again. One thing they discussed was the issue of how to come up with good explanations -- and the way that Naval and David suggested to do it is exactly the same as what Nassim describes in the last paragraph of the passage -- you make conjectures (a theory of how something works) and then you test it empirically! If it holds, you have a good explanation that is very likely to have escaped the Narrative Fallacy.
(If you enjoyed these passages, you might wanna connect with me on Twitter/Linkedin — I consistently post there the best passages from books I’m reading!)
👨💻Other content I have found super valuable lately…
Until next time :)
Julio xx
P.S. If you liked this article, you'll definitely enjoy my free 80-page ebook. It’s packed with 23 big ideas (from top influential doers and entrepreneurs) to become better, richer and wiser. Download your copy here!
Man this is pure gold.